In a statement released today, April 17, the U.S.-based company has said it will close its manufacturing operations in Frankfurt (Oder) in the fourth quarter of this year. It will also indefinitely idle four production lines in Kulim, Malaysia on May 1. "These actions, combined with other personnel reductions in Europe and the U.S., will reduce First Solar's global workforce by approximately 2,000 positions, about 30 percent of the total," it said. 1,200 of the 2,000 employees are based in Frankfurt (Oder).
Overall, First Solar expects to incur asset impairment worth between $150 million to $250 million, primarily related to its Frankfurt (Oder) plants. Severance payments, meanwhile, are expected to be between $50 million to $70 million. The company must additionally fork out $30 million for repayment of a government grant related to the Frankfurt (Oder) operations; and between $15 million and $20 million for "other charges which represents valuation allowances for deferred tax assets in Europe and costs associated with the repayment of the German debt."
"First Solar expects to incur these charges primarily during the first quarter of 2012 and the rest over the course of this year. In addition, First Solar has voluntarily paid down approximately $145 million of debt ahead of schedule in 2012, which represents repayment in full for outstanding amounts under the Company's German loan agreement," continued the statement.
The company said the restructuring changes are expected to reduce its costs by $30 million to $60 million in 2012, and $100 million to $120 million annually going forward. Furthermore, it said its average manufacturing cost is set to improve to $0.70 to $0.72 per watt this year, "below prior expectations of $0.74 per watt". In 2013, it added, it estimates that average module manufacturing costs will range from $0.60 to $0.64 per watt.
Mike Ahearn, chairman and Interim CEO commented, "After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders.
"Decisions like this are not easy, especially given how important the European markets and our associates in Europe have been to the development of our Company and the solar industry as a whole. We are committed to treating all affected associates fairly, and to building our relationships with European business partners that are aligned with our strategy of pursuing utility-scale solar opportunities in sustainable markets around the world."
Watch out for more detailed news on the announcement this afternoon.
Just this week, it was reported that First Solar would be cut from the Nasdaq 100 Index. Meanwhile, in February, the company announced that it would scale back production at its Frankfurt (Oder) facility by 50 percent, thus moving 1,200 employees onto shorter working hours.
First Solar only officially opened its second German plant at the start of November. The move saw the company doubling its production capacity in Frankfurt (Oder) from 250 megawatts (MW) to 500 MW.
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